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Last Updated: 7/2/2014

Bonus Depreciation

If a partnership chose the special depreciation allowance for qualified property on its federal Form 1120S, this “bonus” depreciation must flow through to the partners. For Minnesota tax purposes, the business entity reports the bonus depreciation to partners on Schedule KPI and Schedule KPC

Partners must add back 80 percent of the bonus depreciation amount to their Minnesota taxable income for the year the bonus depreciation was claimed. They can then recover the remaining depreciation by subtracting one-fifth of the addback amount in each of the next five years. View the statute, M.S. 290.01, subd. 19a(7) and 19b(8).

Reporting Bonus Depreciation to Shareholders

On the “federal bonus depreciation” line of Schedule KPI or Schedule KPC, report each partner’s share of the partnership's entire federal bonus depreciation. Do not multiply this amount by 80 percent. (Each partner will calculate their own addback amount when completing their Minnesota income tax return.)

For example, if a partnership has $1,000 in federal bonus depreciation and two 50 percent partners, report $500 on each Schedule KPI or Schedule KPC.

For detailed partner information, see Federal Bonus Depreciation Addition and Federal Bonus Depreciation Subtraction.